A pro-business trade association like the American Council of Life Insurers doesn’t typically endorse the addition of an employer requirement. But given the current state of retirement savings, the life insurance and retirement security advocacy group thinks a mandate to auto-enroll employees in a retirement plan is a good idea.
ACLI announced today (March 12) that it will shift policy and endorse a federal proposal requiring employers without retirement plans to provide workers with access to a payroll deduction for savings through an IRA, 401k, or other qualified retirement savings plan.
The proposal, championed by House Ways and Means Committee Chairman Richard Neal (D-Mass.), could result in 30 million more Americans having access to retirement savings. This would lead to at least 22 million more Americans saving for retirement, according to ACLI estimates based on data from the Bureau of Labor Statistics. Chairman Neal introduced the Automatic Retirement Plan Act of 2017 in the 115th Congress and is expected to reintroduce it later this year.
“This bold approach is clearly needed to close the retirement savings gap and prevent a retirement crisis,” said ACLI President & CEO Susan Neely. “People are living longer without adequate retirement savings and increasing access to workplace plans can be a powerful solution. This proposal is designed to make it easier for employers to offer retirement plans.”
Workers would have the right to opt-out of participation but based on experience the majority will auto-enroll and take advantage of the savings opportunity, Neely continued. “When offered a retirement plan by their employer, four out of five full-time private-sector workers participate.”
Neely said ACLI and its member companies have worked for years to increase incentives and reduce regulatory burdens for employers offering plans.
“Endorsing an employer requirement is not a policy shift that ACLI makes lightly. We believe the scope of the looming crisis demands fresh thinking,” Neely said. “Automatically enrolling workers into a retirement savings plan is not a big new government program. It is a market-based solution that can help more people save more of their own money for the good of their families’ futures. Family financial security is the ultimate peace of mind.”
Congress is already focused this year on the need to act on retirement. The Retirement Enhancement and Savings Act (RESA), which has been introduced in the House, would make it easier and financially viable for small employers to join together to offer their workers 401ks or similar plans. RESA also would make it easier for employers to offer annuities in their retirement plans.
RESA gained strong bipartisan support and momentum during the last Congress (although mandatory lifetime income disclosure is an exception to some extent). Neely said ACLI strongly supports passage again this year.
Americans are living longer than ever before, but many have not saved enough to sustain them in retirements that could last 30 years or longer. A recent study found that a third of Baby Boomers currently in, or approaching, retirement age have between nothing and $25,000 set aside.
“Too many workers are ill-prepared to be financially secure in retirement,” said Neely. “ACLI looks forward to working with Chairman Neal, other retirement security leaders in Congress, the business community, and other thought leaders to raise awareness of the retirement crisis and to seek additional solutions that ensure all Americans, regardless of where and how they work, their life stage, or the economic status of their households, have the tools they need reach their retirement security goals.”